Question
Ashley Company manufactures two models of its sofas, the Mini and the Maxi. The estimated annual overhead is $1,550,000. The Mini model requires 15,000 direct
Ashley Company manufactures two models of its sofas, the Mini and the Maxi. The estimated annual overhead is $1,550,000. The Mini model requires 15,000 direct labor hours and the Maxi model requires 35,000 direct labor hours. The company produces 3,000 units of the Mini model and 2,000 units of the Maxi model each year. The company produces the Mini model in batch sizes of 440, while it produces the Maxi model in batch sizes of 200. The company expects to incur $560,000 of total setup costs this year. Using ABC, how much of the setup costs are assigned to the Maxi model?
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